This article first appeared in The Edge Financial Daily on March 31, 2020

KUALA LUMPUR: With many businesses having ground to a halt while Putrajaya directs that the movement control order (MCO) be enforced more strictly amid rising Covid-19 infections, the business community in Malaysia is crying out for help.

This is despite the RM230 billion addition — announced last Friday — to the original RM20 billion economic stimulus package to address the impact of the pandemic on the country.

From small and medium enterprises (SMEs) to large scale manufacturers and chambers of commerce, the main grouse has been that the stimulus package is too centred on salaried earners and the low-income group, while not enough is being done for the business community.

“We believe that the Prihatin package, though rakyat-centric, is missing the mark, as businesses, especially the SMEs (the goose), are the largest employers of the rakyat and the largest tax contributors to the country.

“Cash handouts (eggs) are only good for the moment but the rakyat needs continuous and secured employment as well as income beyond three months. Deferment of loans and financial obligations of the rakyat is merely delaying the inevitable,” said the president of Malaysian International Chamber of Commerce and Industry (MICCI) Datuk Tan Cheng Kiat in a statement.

“The prime minister has stated that no one will be left behind, and it really has to cover the whole chain within the economy. If businesses falter, everyone will be left behind.

“Giving out eggs is fine but don’t forget to feed the goose otherwise the goose may die, and everyone will be left behind,” he added.

SMEs drained

As it is, SMEs are expecting no cash inflow for at least three months due to the MCO, with nearly one-third of them having only enough to sustain their expenses in March, based on feedback gathered from over 15,000 local SMEs in a survey.

“Yet, SMEs will still need to continue [to pay] full salary, rental and some statutory payments. Nearly one-third or 33.3% of SMEs only have enough cash flow for March while 37.8% can only sustain [their operations] up to April,” according to a joint statement from SME Association of Malaysia and Bizsphere Brand & Marketing Group, who conducted the survey.

SMEs, they said, employ up to 70% of the country’s 10 million workforce, and at this point, about a quarter of them may be forced to retrench workers. This may mean some 2.56 million people will be out of a job. The situation “is serious and scary if not well-managed”, their statement read.

Higher wage subsidy, EPF exemption and income tax waiver sought

In various press statements yesterday, the National Chamber of Commerce and Industry of Malaysia (NCCIM), MICCI, as well as the Federation of Malaysian Manufacturers (FMM) have called for a higher wage subsidy, with no conditions attached.

The FMM, in particular, said the RM5.9 billion allocation for wage subsidy is not sufficient since it is estimated to cover only 3.3 million workers, and should be doubled to RM12 billion, with the RM600 per person per month wage subsidy be extended to all employees, regardless of wage level. The initiative now only covers the three-month salaries of employees earning less than RM4,000 per month, and who are working with employers whose income have halved since Jan 1.

“The subsidy should be automatic without the need for companies to prove reduction in earnings by 50% as all companies would be experiencing a significant reduction in revenue and sales as a result of the Covid-19 and the current MCO. In fact, the FMM had proposed for a 30% wage subsidy by the government on a tripartite shared basis with employers and employees,” said FMM president Tan Sri Soh Thian Lai.

The federation is also calling for a complete exemption or reduction in employer’s contribution to the Employees Provident Fund (EPF) until the end of December this year, instead of the current deferment/restructuring/rescheduling option provided.

“The current initiative of deferment would still tie employers down financially as they focus on their respective business revival plans to ensure business viability and continuity and keeping jobs in the next six months to a year,” Soh said.

These were among the relaxation of the conditions it is seeking on measures that the government announced under its Prihatin Rakyat Economic Stimulus Package.

The FMM is also hoping that banks will fully assist Covid-19-impacted companies from folding over with easier complied conditions, given that the government provides guarantees with low interest under its RM50 billion Danajamin guarantee scheme. Additionally, the FMM appealed to Bank Negara Malaysia (BNM) to further intervene and ensure that there is consistency from all financial institutions in the treatment of interest during the six-month moratorium on loan repayments that the central bank announced last week. “The FMM is of the view that banks should not compound interest but rather waive or reduce the interest during the moratorium period to further assist companies affected,” Soh said.

The federation is also calling for the government to allow all industrial power users, irrespective of their monthly kilowatt usage, to get at least a 15% discount on electricity bills for the next six months.

“In addition, [it should] remove the maximum demand charge for medium and high voltage industrial customers for cement, iron and steel, petroleum and chemical processing industries. Also, reduce natural gas tariffs by 35% until the end of 2020 and remove the “Take or Pay” penalty clause imposed on customers given the current impact on business, as well as the overall drop in oil prices. This will help lower business costs and sustain operations,” he said.

Force majeure certificates, soft loan scheme to cover fixed expenses proposed

The FMM also proposed that the government introduce a RM5 billion special soft loan scheme with a 2% interest to cover fixed capital payments such as rent and utilities, and other administrative expenses such as salaries for companies.

It also suggested that the government to allow corporations’ income tax for the 2020 year of assessment 2020 be waived — regardless of company size — and that the personal income tax be capped at 10% this year, with monthly tax deduction be suspended for six months.

It also urged the government to introduce a Certificate of Force Majeure, similar to the one issued by the Chinese government to help companies get exemption from contractual obligations. “This is to help exporters that are unable to meet contractual obligations due to delays in resuming manufacturing activities following the implementation of the MCO,” the FMM said.